Gift Tax) Final

8/12/2019 Gift Tax) Final

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Gift Tax & Wealth Tax| 1

COMILLA UNIVERSITY

Departmrnt of Accounting & information

systems

Tarm paper on:Gift tax & Wealth Tax

GROUP NAME: NEBULA


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SUBMITTED BY:

Serial No: Class ID Name

01 1106003 Halima Akter shathi (GL)

02 1106021 Khaleda Akter

03 1106029 Bappy Saha

04 1106030 Md. Anamul Haque Sarker

05 1106047 Sudipto Nath Dipto

Dept. of AIS,

6th Batch,

2nd Year, 2nd Semester,

Comilla University.

SUBMITTED TO:

Tarik HossainAssistant professor,

DEPARTMENT OF AIS

COMILLA UNIVERSITY

DATE OF SUBMISSION:

24th

February 2014


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Latter of transmission

24thFebruary 2014

Tarik Hossain

Lecturer,

Department of Accounting & Information Systems,

Comilla University.

Sub: Submission of Term Paper

Dear Sir,

It is our great pleasure that the opportunity to submit a Term Paper on Gift tax and Wealth tax. asyou have authorized us in this semester .We has observed closely & studies different aspect of these

two types of tax.

We tried our best to put meticulous effort for the preparation of this Term paper. Any short coming

or flaw may arise as we are very much novice in this aspect. We will welcome any clarification &

suggestion about any view & conception disseminated in our Term Paper.

Sincerely Yours

Halima Akter Shathy

On behalf of the group

Department of Accounting and Information Systems

Comilla University.


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EXECUTIVE SUMMARY

Taxation is a major source of revenue for the government. Every year government collects a

huge amount of tax for the infrastructural development of a country and to meet its other

expenses. We really enjoyed the team work. We believe that this will definitely help us to

gather knowledge to build our career.

The first section of this term paper is the introduction part. Introduction part includes

orientation of the study in which background of the Mission, vision and core objectives of

taxation. The next section of this term paper includes overall view of Gift Tax & Wealth Tax.

Finally conclusion have been drawn on the basis of the whole discussion.

The aim of the study is to provide a clear concept about the whole taxation policy on the base

of gift tax & wealth tax in our country which will assist strategy group and the management

terms and also shareholders in making correct decisions as how to penetrate company and how

to catch the maximum commercial opportunities in dealing with business partners in this

country.


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Introduction:Taxes are the most important sources of the modern governments. It is a compulsory levy, to be

paid by the citizens who are liable to pay it, imposed by the government. Gift tax and wealth tax are

one of the most valuable parts in term of tax. Gift tax is a direct tax imposed on taxable gift. Gift

means the transfer by one person to another of any existing movable or immovable property made

voluntarily and without any consideration in money or moneys worth. Another part, wealth tax is a

tax based on the market value of asset that is owned. We discussed here the subject matter,

activities, objectives, advantages & disadvantages, various kinds, structure of gift and wealth tax

based on Bangladesh. We are pleased to work on the practical activities of tax related matter like

gift tax and wealth tax. We gather lots of knowledge about gift & wealth tax.

Objectives of the Study:

This report is designed to know more about the overall activities about gift tax and wealth tax.

In addition, the study seeks to achieve the following objectives.

To identify the activities of gift tax & wealth tax. To identify the objectives of gift tax and wealth tax. To know the contribution of gift tax & wealth tax in national development. To know about the advantages & disadvantages. To know the various plan of gift tax & wealth tax.


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Scope of the study:

In spite of limitations we also enjoyed some facilities to complete our term paper. We have got lots

of information & basic concept of gift tax and wealth tax from the various link and various text

books. Our honorable course teacher Tarik Hossainsir also helped us a lot. He gave us guidelines

how to prepare our Term Paper more attractive and perfect. We are fortunate to get these topics

because both gift tax and wealth tax are common figure in the concept of tax. We got an

opportunity to gather knowledge different departments of gift tax & wealth tax.

Methodology:

The theoretical analysis is the basic method of our term paper. The basic research program is to

represent the various activities, subject matter, analysis, concepts, advantages and disadvantages.

Our secondary sources of data various textbook about gift & wealth tax and different articles

published in the journals & magazines have been used.

Secondary Sources are:

Website about gift and wealth tax. Tax related Journals & other books.

Limitations: Preparing the term paper we have faced some obstructions which are:-

Lack of proper information in the websites of gift and wealth tax. Lack of required information in the text book. Lack of necessary information in the journals and magazine. Inexperience and time constraint is the limitation restricting this report from being more

detailed.

Secondary data has been collected from the hand books, magazines, which may biased tothe tax


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Table of Contents

Serial no: Headlines Page Number

01 Definition Of Gift Tax 0902 Scope Of Bangladesh Gift Tax 10

03 Chargeability 10

04 Exemption In The Case Of Certain Type Of Gifts 11

05 Method For Determination Of The Value Of Gift 12

06 Assessment Of Gift Tax 12

07

Rates Of Gift Tax

1308 Payment Of Gift Tax 13

09 Recovery Of Gift Tax And Penalty 13

10 Limitation Of Implementing Certain Laws 13

11 Some Practical Use Of Gift Tax 14

12 Wealth Tax 15

13 Charge Of Wealth Tax 1514 Computation Of Net Wealth 16

15 Exemption In The Case Of Certain Type Wealth Tax 17

16 Advantages Of Wealth Tax 18

17 Disadvantages Of Wealth Tax 19

18 Property Tax 20

19 Conclusion 2020 References 21


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GIFT TAX

A graduated tax assessedagainst aperson who givesmoney oranasset to another person withoutreceivingfair compensation.

In economics, a gift tax is the tax on money or property that oneliving person gives to another. Many gifts are not subject totaxation because of exemptions given in tax laws. The gift taxamount varies by jurisdiction, and international comparison ofrates is complex and fluid. The gift tax applies to the transfer bygift of any property. You make a gift if you give property (includingmoney), or the use of or income from property, without expecting to receive something of atleast equal value in return. If you sell something at less than its full value or if you make aninterest-free or reduced-interest loan, you may be making a gift.

According to Nikhil Chandra Shil, Generally the word Gift means something that isbestowed voluntarily and without compensation to someone.

As per the section 2(f) of the gift tax Act 1990, Gift means the transfer by one person toanother of any existing movable or immovable property made voluntarily and without

any consideration in money or monies worth.

GIFT TAX

The gift tax is a tax on the tran

of property by one individua

another while receiving nothing

less than full value, in return.
http://www.investorwords.com/8787/against.htmlhttp://www.investorwords.com/14646/person.htmlhttp://www.investorwords.com/3100/money.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/14717/receiver.htmlhttp://www.investorwords.com/9658/fair.htmlhttp://www.investorwords.com/9658/fair.htmlhttp://www.investorwords.com/14717/receiver.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/3100/money.htmlhttp://www.investorwords.com/14646/person.htmlhttp://www.investorwords.com/8787/against.html


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SCOPE OF BANGLADESH GIFT TAX :Gift tax, its calculation and application in Bangladesh is guided by-

1.The gift tax act 1990(Act no 44 of 1990): The gift tax act 1990 came into force on first July1999. It has 21 sections, numerous subsections and one schedule containing rates of gift taxwith reference to section 3.

2.The Gift Tax Rules 1990: the gift tax rules 1990 is issued exercising the power vested through

section 21 of the gift tax act 1990. So far 6 rules and five from formats have been issued by the

NBR.

CHARGEBILITY:Every gift is not taxable under the act. Before charging tax on gift, someprecondition is required to be met as pointed out below:

Transfer of property, either of movable or immovable is a must, Transfer of an existing property can be a gift. Any property that is not existed can be

transfer as a gift. Transfer must be made by one person (donor) to another (donee). To be a gift the transfer should be made voluntarily without fear and favor. Transfer should be made without or with in an inadequate consideration in money or

moneys worth.

However, Gifts made by the following are not taxable as per section 20 of Gift Tax Act 1990.

(a) A body corporate established or constituted by or under any law, and(b) Any institution or fund, income where of is exempted from income tax under paragraph oneand two part A of the sixth schedule of ITO 1984.(c) Subject to the provisions of this chapter, charge of gift tax shall be made on each giftexecuted by any person in a financial year with effect from July 1, 2012 at the rates mentionedin Part-A of the Third Schedule.


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Exemption in the case of certain type of gifts(1) No gift tax shall be applicable under this Act for gifts made by any person in the following

context,-(a) Where the gifted property is situated outside Bangladesh;(b) Where the gift is made to the Government or any local authority;(c) Where the gift is made to:-

Any educational institution including any polytechnic institution either recognized by aneducational board or the government or run by the government, or any universityestablished under any law in force in Bangladesh;

Any hospital either recognized or run by the government or the local authority, or anyhospital that receives charity from the government or the local authority;

Any flood or disaster management fund either established or approved by thegovernment;

Any charitable or religious establishment like mosque, mender, temple, pagoda, churchetc.

(d) Gift made under a will;(e) Gift in contemplation of death; or(f) Gift made to son, daughter, father, mother, spouse, own brother and sister.


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Method for determination of the value of gift:(1) Under the provisions of this chapter, the value of the property transferred as gift, except forcash, shall be determined in terms of its value to be obtained had the property been sold in an

open market on the date of making the gift.(2) Where the value of a property is not determinable under sub-section (1) for not beingsaleable in an open market, its value shall be determined as per rules.

Assessment of gift tax:(1) Where the Deputy Commissioner of Taxes, upon examination, is satisfied that a returnsubmitted under sections 115 or 116 is correct and complete, he will assess the tax payable bythe assessed on the basis of the return.(2) Where the Deputy Commissioner of Taxes is not satisfied with regard to the correctnessand/or completeness of the return submitted under sections 115 or 116, he may direct theassesse through a notice to submit necessary documents in support of the return to his officewithin the date specified in the notice.(3) The Deputy Commissioner of Taxes, upon examining the documents submitted by the

assesse, and, if required, upon giving the assesse an opportunity of being heard, will assess the

amount to be paid as gift tax by the assesse.

(4) Where any person, upon receiving a notice, fails to submit return under sub-section (2) of

section 115 or fails to submit documents in support of the return under sub-section (2) of this

section, the Deputy Commissioner of Taxes may proceed to assess the amount of gift tax to be

payable by the assesse based on the information or documents available to him.


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RATES OF GIFT TAXGift tax is progressive like income tax with 4 tiers. The rates with the

value of taxable gift are quoted below from the schedule of the GiftTax Act, 1990- Value of Taxable Gift Rates

1. On the first tk. 500000 of the value of all taxable gift 5%2. On the next tk.1000000 of the value of all taxable gift 10%3. On the next tk. 2000000 of the value of all taxable gift 15%4. On the balance amount of the value 20%

Payment of gift tax:(1) Any person liable to submit return under the provisions ofsection 115 shall pay tax as per return on or before the submissionof the same.(2) Where a person fails to pay tax under the provisions of sub-section (1) without any reasonable ground, he shall be deemed tobe an assessed in default.

Recovery of gift tax and penalty:The amount payable as gift tax or penalty mentioned in the noticeunder section 120 shall be paid within the time mentioned in thenotice and the assesse shall be deemed to be an assesse in defaultin case of his failure to do so within the time given.

Limitation of implementing certain laws:The provisions of this Chapter shall not apply to-(a) Any gift made by a statutory organization formed under any law; or(b) Any gift made by an organization or fund exempted from income tax..


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Some practical use of gift tax

1. Gift tax is a direct tax- true or false?Ans: True.

2. Cash donated on marriage of brother-in-law taka 100000/-, who is depended , what is thetaxable amount?

Ans: Under section 4(1)(d) , CASH Gift to any depended relative , up to TK. 20000/- will be

exempted , so the taxable AMOUNT is Tk. 80000/-.

3. Cash donated on marriage of brother-in-law taka 100000/-, what is the taxable amount?Ans: Under section 4(1)(h), Any gift to son daughter, mother, father, his/her spouse, own brother

and sister will be fully exempted.

4. Donation to prime ministers relief fund TK.45000/- ?Ans: full exempted . as well as, any amount donated to government recognized institution Will be

fully exempted

Any educational institution run by the government Any hospital either recognized or run by the government Any flood or disaster management fund approved by the government; Any charitable or religious establishment like mosque, mender, temple, church etc.5. Is donation to a political party taxable?Ans: yes. The total amount will be tax able

6. Donation to a local high school under a will Tk. 50000/- , is the amount is taxable?Ans: No. The total amount will be tax free, Under section 4(1)(f). where it is said that,

any Gift under a will or any gift in contemplation of death will be tax free.


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WEALTH TAX

wealth taxis generally conceived of as a levy based on the aggregate

value of all household assets, includingowner-occupied housing;cash,

bank,money funds, and savings ininsurance andpension plans;

investment inreal estate andunincorporated businesses;

andcorporate stock,financial securities,and personal trusts. A wealth

tax is a tax on the accumulated stock of purchasing power, in contrast to income tax,which is a

tax on the flow of assets (a change in stock).Wealth tax is imposed on the wealth possessed by

individuals in a country. The tax is on a person's net worth which is assets minus liabilities.

Charge of Wealth Tax:

(1) Subject to the provisions of this Act, every person shall be liable to pay wealth-tax on thenet wealth on the valuation date of a tax year.(2) The wealth-tax shall be charged in respect of the net wealth referred to in sub-section (1),on the valuation date of a tax year at the rates mentioned in Part-B of the Third Schedule in themanner provided therein.(3) The liability to wealth-tax shall be discharged by payment of pre-paid taxes in accordancewith the provisions of this Act.(4) The wealth-tax charged under this section shall be collected after allowing credit for pre-

paid taxes, if any, in accordance with the provisions of this Act.

Not all countries have wealt

tax;Austria, Denmark,

Germany, Sweden, Spain,

Finland, Iceland and

Luxenberghave abolished it
http://en.wikipedia.org/wiki/Homehttp://en.wikipedia.org/wiki/Money_fundhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Unincorporated_entityhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Income_taxhttp://en.wikipedia.org/wiki/Income_taxhttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Unincorporated_entityhttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Money_fundhttp://en.wikipedia.org/wiki/Home


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Computation of net wealth.-

Most wealth taxes around the world are based on net worth, which is typically found bytotaling the taxpayer's assets, and then subtracting debts, such as loans and mortgages. Assetsinclude cash deposits, realestate holdings, investments, trusts, and shares in businesses. Sincewealth taxes mean that a nation's wealthiest taxpayers have to pay a proportionately higheramount in taxes than their poorer counterparts, it is considered a type ofprogressive tax.

any building or land appurtenant thereto used for any purpose; any farm house situated within twenty-five kilometers from local limits of any

municipality or municipal corporation or a Cantonment Board;

any urban land;

motor car, yacht, boat, helicopter and aircraft other than those used by the assessee inthe business of running them on hire or as stock-in-trade;

jewelry, bullion, furniture, utensils or any other article made wholly or partly of gold,silver, platinum or any other precious metal or any alloy containing one or more of suchprecious metals, other than those used by the assessee as stock-in-trade;

archaeological collections, drawings, paintings, sculptures or any other work of art; watch having value in excess of fifty thousand taka; cash in hand, in excess of two hundred thousand taka, of individuals; deposit in a bank located outside Bangladesh, in case of individuals and in the case of

other persons any such deposit not recorded in the books of account;

any interest in a foreign trust or any other body located outside Bangladesh (whetherincorporated or not) other than a foreign company; and
http://www.wisegeek.com/what-is-an-estate.htmhttp://www.wisegeek.com/what-is-a-progressive-tax.htmhttp://www.wisegeek.com/what-is-a-progressive-tax.htmhttp://www.wisegeek.com/what-is-an-estate.htm


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Exemption in the case of certain type wealth tax1. The specified assets referred to in sub-section (2) shall not include the following,

namely:

the value of the assets located outside Bangladesh, if the person is a non resident; and any one house or part of a house or one vacant plot of land not exceeding five hundred

square metres of area belonging to an individual.

The house referred to in clause (a) of sub-section (2) shall not include the following, namely:

a house meant exclusively for residential purposes allotted by a company to anemployee;

any house for residential or commercial purposes which forms part of stock-in-trade; any house which the assessee may occupy for the purposes of business carried on by

him;

any house that has been let-out for a minimum period of three hundred days in thefinancial year;

any house in the nature of commercial establishments or complexes.


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Advantages of Wealth Tax:

There are many lines of argument in favor of including a tax based on individual net wealth.Variations in how the details of the particular net wealth tax is implemented, including whether

there are exemptions and whether other taxes are lowered or flattened will have an impact.Income conventionally is defined as the sum of consumption and any change in net worth. Thisdefinition highlights three likely bases for a tax: income, consumption, and net worth. Tax ratescan be applied to essentially any base (or combination of bases) to raise the revenue thatgovernment requires.

1. Fairness: According to the "beneficiary pay" criterion of tax fairness, a tax on propertyrights can be seen as a use fee. Specifically, protection of property rights is a primarypurpose of government holders of property rights enjoy the existence of governmentmore than those who hold no property rights do. This is also true of ownership interestsor stock and bonds.

2. Revenue: In 1999, Donald Trump proposed for the United States a once off 14.25%wealth tax on the net worth of individuals and trusts worth $10 million or more. Trumpclaimed that this would generate $5.7 trillion in new taxes, which could be used toeliminate the national debt. A net wealth tax may also be designed to be revenueneutral as where it is used to broaden the tax base, stabilize the economy and reduceindividual income and other taxes.

3. Economic growth: A wealth tax that decreases other tax burdens, such as income,capital gains, sales, value added and inheritance, increases the time horizon for

investment and can increase the return on investments over that time. The increasedtime horizon of investment results from the competition for investment between therisk-free asset of modern portfolio theory, and commercial assets. The higher return oninvestment results from the removal of taxes on profits. More economic equality hasbeen correlated with higher levels of innovation.

4. Investment: A wealth tax serves as a negative reinforce which coerces the productiveuse of assets. According to University of Pennsylvania Law School Professors DavidShakow and Reed Shuldiner, "A wealth tax also taxes capital that is not productivelyemployed. Thus, a wealth tax can be viewed as a tax on potential income from capital.

Because a net wealth tax can be the equilivant of an annual tax on imputed income, thecapital gains, estate and gift taxes are not necessary.

5. Job creation and Social Security reform: A wealth tax of 2% could replace the 15%payroll taxes and enable business to have more money to hire workers and increaseemployee consumer spending. Millions of jobs would be created with no governmentspending. Using a wealth tax to fund Social Security and Medicare would also eliminateany short term need to reduce benefits.


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6. Wealth redistribution: Tax codes redistribute income, and over time, there is also someredistribution of wealth (even if it is entirely unintended). For example, each year, theUS tax code redistributes income of $1.3 trillion in tax expenditures ("loopholes"). Thebottom half of the United States had 3.6% of the net wealth in 1995, which was reduced

to 1.1% in 2010, over the same time frame the wealth of the top 10% grew to 75% ofthe wealth. The annual tax loopholes are twice the size of all the wealth owned by halfthe United States.

7. Housing and consumer debt: A net wealth tax permits an offset for the full principal ofany mortgage, student loan, automobile loan, consumer loan, etc. Thus, even with taxreform that eliminates income tax deductions for interest, taxpayers may be better offwith a full credit for the amount of the debt for the net wealth computation. In the US,the net wealth tax offset for debt would be particularly helpful to restore a healthyhousing market and help college graduates with unpaid student loans.

8. Social effects: By unburdening the poor and middle class of taxation, while stimulatinginvestment in commercial assets that create demand for labor, more financial resourcesin the hands of the poor and middle class would reduce their reliance on governmentdelivery of social goods, such as improved educational opportunities for their children.That would promote social mobility; mean more citizens reach their full potential ofproductivity, thus improving the economy. Increased government revenue from awealth tax could be used to promote public investment in services like education, basicscience research, and transportation infrastructure, which in turn improve economicefficiency

Disadvantages of Wealth Tax:

1. Capital flight: The Washington Post titled "Old Money, New Money Flee France and ItsWealth Tax" pointed out some of the harm caused by France's wealth tax. The articlegave examples of how the tax caused capital flight, brain drain, loss of jobs, and,ultimately, a net loss in tax revenue. Among other things, the article stated, "ric Pichet,author of a French tax guide, estimates the wealth tax earns the government about $2.6billion a year but has cost the country more than $125 billion in capital flight since1998." The concern about capital flight is lessened where a country such as the UnitedStates has worldwide tax jurisdiction and assets may be taxed wherever they are

located.

2. Valuation: Valuation and accounting difficulties make wealth taxes systems have hadhigher management costs for both the taxpayer and the administrating authorities thanother taxes. One study in the Netherlands found that the aggregated cost of the tax'syield] was roughly five times that of income tax. Advances in access to internetdatabases over the last decade have made digital filing of tax returns more common andmandatory digital filing of combined wealth


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Property tax: A tax on net wealth permits an offset for debt and should not be confused with aproperty tax on real property or certain assets.

For example, a tax on real property will generally be based on a percentage of the market valueof the property whereas a net wealth tax applicable to the same property applies to the marketvalue less the outstanding mortgage. A net wealth may be practical for all types of wealthwhere a country, such as the United States, has worldwide tax jurisdiction but less suited tocountries with territorial tax jurisdiction or for taxation at the state or local level.

ConclusionAfter a long journey of workings, we come to an end. We learnt a lot of things at the time ofpreparing our term paper. We worked on two well-known concept of tax- Gift tax & Wealth tax.We completed our work with planning way as we summarize before. We discussed gift tax withits definition, objective, chargeability etc. We discussed wealth tax in same way of gift tax. Weenjoyed our working experience. . Although, we faced many problems but we tried our levelbest to make it acceptable.


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Gift T & W lth T | 21

Reference Book Reference:

Bangladesh Income Tax

Theory and Practice

Nikhil Chandra Shil

Mohammad Zakaria Masud

Mohammad Faridul Alam

Class Lecture:

Tarik Hossain

Lecturer,Department of Accounting & Information Systems,

Comilla University.

Websites:

o http://www.investopedia.com/terms/g/gifttax.asp#ixzz2NGIjmjZx

o http://www.taxmatebd.com/index.php?pid=65

o http://www.investopedia.com/terms/w/wealth-tax.asp#ixzz2NGSWApnc

o

http://wircicai.org/wirc_referencer/income%20tax%20&%20wealth%20tax/Wealth%20Tax.htm

o http://www.taxmatebd.com/index.php?pid=67

o http://bankinfobd.com/blog/wealth-tax-stays-in-fy13

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